FMC Invites Comments on New Demurrage & Detention Rule
The Federal Maritime Commission approved an Advanced Notice of Proposed Rulemaking on February 4, 2022. The notice asks the public if a new rule governing demurrage and detention billing practices would benefit the trade and should apply to marine terminal operators and non-vessel operating common carriers in addition to vessel-operating common carriers.
Specifically, the Commission is considering the merits of establishing regulations mandating certain minimum information be included in bills issued for demurrage and detention charges and prescribing the maximum period in which an invoice can be sent. Additionally, the Commission is seeking industry views on whether it should regulate the demurrage and detention billing practices of common carriers and marine terminal operators. The ANPRM broadly defines the terms “demurrage and detention” to include any charges assessed by common carriers and marine terminal operators related to the use of marine terminal space or shipping containers, regardless of the labels given to those charges.
The ANPRM is being issued in response to information developed by Commissioner Rebecca F. Dye as part of her work leading Fact Finding 29. In July 2021, she identified issuing an ANPRM on these topics as one of the Interim Recommendations provided to the Commission on how the agency can address complaints and issues related to demurrage and detention.
The Commission is requesting comments on what specific information should be required on demurrage and detention bills. It is interested in learning what information is necessary to identify a shipment, and whether bills for demurrage and detention should include information on how the charges are calculated and what circumstances justify stopping the clock on charges. Finally, the Commission is soliciting guidance on how to ensure a bill is being issued to the correct party and whether an explanation of the source and reason for the charge should be required.
Comments received in response to this ANPRM will be used to inform the Commission if it should issue a Proposed Rule.
The full text of the ANPRM will soon be published in the Federal Register and provides details on the information sought by the Commission, how to submit comments, and the deadline for providing submissions in the docket.
On January 27, 2022, the FMC met in both open and closed session to discuss, among other things, updates on the detention and demurrage issues.
Lucille Marvin, the Commission’s Managing Director is leading both the Vessel-Operating Common Carrier (VOCC) Audit Program and VOCC Audit Team, told Commissioners that detention and demurrage issues remain persistent, but direct engagement with ocean carriers is yielding progress in changing behavior and practices. As a result of the Team’s initial review of carrier data last year, the VOCC Audit Team urged carriers industrywide to adopt detention and demurrage best practices. Since then, several carriers have restructured the information available on their websites, created streamlined dispute resolution processes, and developed more structured documentation regarding their detention and demurrage policies.
While commissioners expressed concern about Audit Team data that showed carrier revenues from detention and demurrage charges were up sharply over 2021, Commission staff made clear this is not an unexpected development given record volumes of trade and congestion throughout the U.S. supply chain. Additionally, chassis shortages, insufficient warehouse space, and some shippers abandoning cargoes are contributing to the issuance of detention and demurrage charges.
“The vast increase in detention and demurrage charges being billed by the carriers is certainly concerning but must be seen in the context of the overall congestion situation at U.S. ports and inland networks. Carriers are also waiving a much higher percentage of detention and demurrage charges and that’s one indication that the 2020 interpretive rule and enhanced enforcement is changing some practices and reducing collections of unreasonable detention and demurrage charges. However, the audit findings also tell me that we have a long way to go and must not let up one bit either on our enforcement efforts or the additional rulemaking on detention and demurrage recommended by Commissioner Rebecca Dye,” stated FMC Chairman Daniel B. Maffei.